The long-awaited regeneration of Longbridge in Birmingham is threatened because of a lack of funding following the abolition of the regional development agency, Labour has claimed.

Angela Eagle, shadow Chief Secretary to the Treasury, warned that industry was being denied vital Government aid after she visited the site in Northfield.

A bid by developers St Modwen for support from the Government’s regional growth fund, which was designed to help firms create jobs in the regions outside London, has been turned down.

A total of £450 million was provided in the first round of funding, but businesses in the West Midlands alone submitted bids for £459 million.

It meant that of 72 bids for funding in the region, only five were successful.

Ms Eagle, who toured the site alongside St Modwen managers and local MP Richard Burden (Lab Northfield), said Labour would never have abolished the regional development agency, which spent around £250 million in the region each year.

The agency, called Advantage West Midlands, will close next year but it has already stopped allocating funding.

She said: “I am concerned that a bid as important as St Modwen’s has been ruled out of the regional growth fund.

“As a region, the West Midlands out in bids for more than the total regional growth fund.

“The work at Longbridge is very important but there is not enough money to go around even for bids which obviously have merit.”

She also criticised the Government for dithering over the fate of a 23.1 hectare site in the middle of Longbridge which is currently owned by Advantage West Midlands.

The agency has recommended that the land remain in public ownership so it can be developed in partnership with St Modwen, but the Government is still considering what to do with it.

Ms Eagle said: “Because the government has decided on a sale of RDA assets, there is total uncertainty about what is going to happen to that land which is right in the middle of quite a challenging project.

“There are thousands of jobs being created at Longbridge. It is a pity to see the work being made a lot harder.

“It might just be flogged off to the highest bidder. This uncertainty creates an obstacle to growth.”

St Modwen’s plans for Longbridge include Bournville College campus, a new Longbridge town centre, housing and various commercial developments.

But Bill Oliver, the firm’s chief executive, has warned that the development “will remain very reliant on public sector or alternative forms of funding”.